Found potential deal. Need help analyzing possibilities.

[Jim Francis]

I am trying to figure out if a property is worth buying. I found a home sitting on an acre lot outside los angeles. The land has several structures on it that I think need to be razed. There is a barn that I think should be converted to a rental. The home is a nice 3 family. The initial asking price was 1.4 million, and the owners are now asking 900K. They have said they are willing to do a lease option for $2500/month because they don't want to take capital gains, and they would potentially like to get a fixed income from it.

I think I might be able them down to $800k. I'm pretty sure I could get $2000-$2500/month for the home and a converted barn might fetch another $1500. First - can you rent out a property that you have gotten a lease option on?

I think renting both buildings might be one option. The other idea is to split the lot into 2. Sell the lot with the house. Raze the barn and build a new home in its place. Then sell the new home. Are there problems that come with something like this?

Without spliting the lot, I think If I improve the property with $50k, I'm sure I would be able to get over $1million, but I wonder how best to finance it. Do I go with the lease option, do the repairs, purchase the property early, then assign it to a new buyer? OR Should I just find some private lender, buy it, fix, then flip?

I'd like to hear any of your ideas on how to make something like this work. Thank you.